May 26 The Case for a Social Entrepreneur Safety Net

The world is crawling with young people who want to make a difference. As more and more schools and universities incorporate social enterprise and philanthropy into their curriculum, it's obvious that the trend towards work on purpose isn't slowing down any time soon. For those young people that do not find the right job in the social sector, they may try to turn their passion into a startup, with the term social entrepreneurship burned into their brain from their corresponding degree or school activity. While the interest in social entrepreneurship continues to spread like wildfire, no matter where I look, I fail to see the safety net that will surely be necessary to catch so many young, inexperienced, potential social entrepreneurs upon graduation or trying to turn their first idea into a reality. After finding that perfect idea and gathering resources, finding capital is the most important and difficult aspect to a newly formed social venture. Since social enterprise generally connotes a profit-seeking venture, most young social entrepreneurs will try to make a profit from their idea to keep their business sustainable, but the difficult part is finding start-up capital to get their idea off the ground. The lure of emerging markets such as impact investing may further convince young social entrepreneurs of their idea's certain feasibility.

Social entrepreneurship has turned into a bubble, and everyone wants in. The question is, do emerging markets such as impact investing have a large enough safety net to hold the social entrepreneurship bubble?

The 2011 GSEC Trade Show with participants and contestants.

In a recent Next Billion interview with Felix Oldenburg, the Ashoka director of Europe and Germany, Felix spoke of the 'dangerous promise of impact investing,' in that impact investing is predicated on the ability of social ventures to generate income. For those inexperienced social entrepreneurs banking on the possibility of impact investing as a way to generate capital, they may be sorely surprised when that $1T in assets promised by JP Morgan doesn't immediately materialize in the form of investors.

Even though investing in socially focused businesses is turning into an emerging asset class, young, inexperienced social entrepreneurs are not going to be the recipients. Why? Just because markets may be changing doesn't mean the mindset is: it will always be considered risky practice to invest in an amateur.

So, where do start-up social enterprises receive their experience and resources, in order to work up to a place where investors feel comfortable financing for a return? Incubators.

The biggest problem for young social entrepreneurs is finding capital, but the typical investor isn't ready for them yet. Incubators, like those of Echoing Green or Ashoka, grow social enterprises to a point where investors do feel comfortable and excited about personally investing. Impact investors should consider investing in social enterprise incubators, who then fund social entrepreneurs, which is the best way of getting those necessary resources, capital and experience into the hands of all of those social entrepreneurs who need it. This is the type of safety net necessary to catch the next generation of social entrepreneurs inspired with ideas from their Social Enterprise degree.

The 2011 GSEC Awards Banquet with participants and contestants.

In a 2010 discussion turned entrepreneurship vs. education debate between tech entrepreneur and professor Vivek Wadhwa and Tech Crunch founder Michael Arrington, Wadhwa disagreed with Arrington's reactionary statement that 'the best thing [for a young person] is to go to Harvard for a year and drop out [to start your own business.] Everyone knows you were smart enough to get in.' Wadhwa argued that no, not everyone is the next Mark Zuckerberg, and it's important to stay in school, while you can, when you can. His point was that for every Zuckerberg, there are a thousand more students that drop out with an idea and fail.

The same holds true for social enterprise programs and degrees; not every student who graduates with a degree in Philanthropy or Social Entrepreneurship is going to be the next Muhammad Yunus. In my opinion, to be successful in a venture with a double or triple bottom line is even more difficult than starting the next Facebook; for students whose heads are filled with social change lingo, their expectations for success may be unrealistic when it comes to starting their own social venture after they graduate from their Social Enterprise 101 business course.

We need to invest in more incubators as a jumping off point for young social entrepreneurs, since these are the kinds of safety nets that are necessary to fund start-up ventures. Impact investing, though promising for larger social enterprises, isn't going to cut it for students emerging from Philanthropy and Social Entrepreneurship programs with an idea and a passion for change.